How Many Credit Cards Should You Have?

Credit can be a beautiful thing – allowing you to safely make purchases and earn rewards. Managing credit cards responsibly can help your credit, which can make you a more attractive renter, get you a better interest rate, and can even impact your candidacy for a new job.

However, paying with credit cards disassociates us from the physical act of spending cash, making it easier to spend more money. Further, there’s a reason that card companies offer bonuses and points. The average American household has a credit card balance of $8,377 and has an interest rate that is greater than 12%.

While credit can be powerful, it can also be a nightmare; I’ve struggled out of credit card debt many times. I’m now out of credit card debt and have vowed to never rack up a balance again. One key to reining in my debt was properly managing the right number of credit cards. So, how many credit cards should you have? My answer is at least two, and no more than four.

Why do you need to have at least two cards? You may run into a situation where your card isn’t taken by a particular merchant. Select at least two cards and ensure at least one is a Visa or MasterCard; these are widely accepted. Discover and American Express can offer powerful benefits but tend to be accepted by fewer stores.

Why shouldn’t you have more than four cards? Because complexity makes it more difficult to manage your debts. Psychologically, it can be “easier” to spend if you have more cards – your Visa may have a $2,300 balance, but your Discover is paid off; so charging that new maxi dress to your Discover isn’t that bad…(Yes, it is!)

Beyond your two basic credit cards, add up to two more that allow for special benefits. For example, one of these might be a card tied to a hotel chain or airline that you frequent and provide additional value like upgrades or early boarding. One might be a card linked to a charity you support; this allows you to donate regularly to a cause via your regular spending.

What shouldn’t you do?

No store cards. I’m serious; store cards offered by retailers have very high interest rates and generate huge profits for the businesses that offer them. There’s a reason why every cashier asks if you’d like to save today by signing up – many are compensated to do so because of the revenue these cards generate.

Avoid cards with annual fees. There’s no reason to pay an annual fee for a card unless you’re absolutely certain it is a good value. One of my frequent traveling friends has an airline-branded credit card, with an annual fee of nearly $500. However, because she’s constantly on the road, the cost of the lounge access provided by this card is worth the high annual fee. She can grab free snacks, drinks, and a quiet place to recharge between flights; some lounges even have showers for post-red-eye refreshing.

No foreign transaction fees. If you travel, secure at least one card that doesn’t have a foreign transaction fee. Foreign transaction fees hover around 3% and are charged when you buy an item in a foreign currency. That can add up for frequent travelers.

Don’t add your partner to your card too early. Credit card debt accumulated on a joint card is the responsibility of both parties. If your partner racks up a $25,000 credit card bill on a joint account, you share liability for that debt. I would not add someone to my credit card account unless I had a legal agreement in place that dictated payment responsibilities in situations like this; (a cohabitation agreement or prenuptial agreement can cover this.)

Don’t churn cards for points (unless you have the time and are extremely disciplined). There are many stories about people who funded luxury vacations using the “free” points they got from “churning” credit cards (signing up for cards temporarily to take advantage of card bonuses.) Most of us don’t have the time and focus to keep track of the details needed to profit from this exercise.

If you have too many cards, start canceling them gradually. Your credit score may take a small dip, but it is worth it to avoid managing many cards. You could also cut up your cards and wait to close the actual account (unless there is a fee associated with the card, in which case I’d suggest canceling it right away.)

Sort your cards by interest rate and credit limit; keep those you've had the longest, with the lowest rates and highest credit limits. You may also elect to negotiate those before you cancel, if there’s a card you love to use but it has a very high interest rate, for example.

Don’t ring up a balance you can’t pay off. Get into the habit of paying your credit card debt off every month. As someone who has struggled with credit card debt, I have to put steps in place to ensure I don’t overspend. I only put expenses greater than $100 on credit cards, and I transfer the money immediately from my checking account to my credit card – typically the day I make the purchase.

Get your finances in order by getting the right number of credit cards in your wallet! There are many resources for you to compare credit cards and select the right one for you, including NerdwalletCredit Card Tune-Up, and Consumer Reports.

What are your credit card tips? Is there anything I missed? Let me know your thoughts - you’ve got this!

xoxo, Ms. Financier

This post also appeared on the Fairygodboss blog - I love their mission to improve the lives and workplace for women, through transparency.